McKinsey - Designing better employee benefits

A report by leading Management Consultants has said that "Senior executives in the United States should be doing everything they can to control the rising costs of health care benefits while maximizing returns on this investment." With benefits costs are increasing three to four times faster than inflation the article states that some Fortune 500 companies are predicting that costs could outstrip their profits within a few years. According to McKinsey the issue "has gone well beyond budgeting discussions by human-resources departments, as suggested by GM chairman and CEO Rick Wagoner's call for a national health policy to address a problem he says threatens the competitiveness of US corporations." The report calls for companies to take a more pro-active stance in deciding what benefits to purchase looking at them as an investment and measuring the returns. Employees should be seen as internal customers and plans should be developed that closely match their expressed needs. By measuring expected returns?whether in cost savings or reduced employee absenteeism?on a regular basis, managers can be more certain they are getting what they are paying for. The report highlighted the fact that each workforce segment has different priorities for cost and coverage and employers should research benefits against what their employees value and use the research to get a higher value or return from their benefits spend by cutting back on areas that are overfunded and unappreciated. The report went on to say that "Ideally, plan managers should begin their research in late autumn or in winter so they can design and test new products in the spring and have the final packages ready for the following autumn's enrollment window. The internal market research will help managers design and test new benefits combinations and communicate to employees the value in the redesigned packages."